Insurance Broker Level 1 set 2 Flashcards
Insurance
The premiums of the many are used to cover the losses of a few
Negligence
The omission or failure to do something which a reasonable person would do, or doing something which a prudent and reasonable person would not do.
How Insurance benefits society
- Spreads the losses of a few among many
- Benefits businesses by freeing up money to spend on growth.
- Creates jobs
- When an insurer shares the risk with reinsurers, it spreads the risk and helps the industry remain strong.
Four types of insurance companies
- Stock - Owned by shareholders - most common
- Mutual- a co-operative - owned by policy holders
- Captive - owned by its parent company to fund its
losses. A group captive is owned by more
than than one parent company - Lloyds of London - An Insurance market whereby
syndicates are set up to accept the risks.
Law of large numbers
A sufficient number of previous losses must exist in order for predictions about the future to be statistically credible.
Underwriter
An insurance professional who determines risk acceptance or rejection on behalf of an insurance company.
Claims Adjuster
One who investigates, negotiates, and settles claims.
Salvage
The portion of any property remaining after a loss that still has some value or usefulness.
Subrogation
The right of an insurer, after indemnifying an insured, to take over the insureds rights of recovery against any party responsible for loss or damage.
Telephone Adjuster
Is an employee of an insurance company and handles all claims by phone.
Independent Adjuster
Works for an independent adjustment firm, accepts claim assignments from insurance companies.
Public Adjuster
One who is hired and paid for by the insured and represents their interests in a claim.
Treaty Insurance
A wide class of risks for a defined period of time.
Facultative Insurance
Placed on an individual cased basis.
A loading applied by an underwriter
An additional charge included in an insurance rate to reflect a hazard not contemplated in the basic rate for the class.
Cession
The portion of risk that insurance companies transfer or cede to a reinsurer.
Retention
The amount the insurer keeps for their own account.
Reasons for reinsurance
- To increase capacity
- To provide stability in times of market fluctuation
- To reduce the impact of catastrophic losses
- To maintain balance between asset reserves and
liabilities - To close insurance operations
Broker
An independent business person who is authorized to sell insurance policies on behalf of an insurer.
Agent
Represents one company only, the company they are employed by.
Direct Writing Company
Deal directly with the public (employs agents)
Exclusive Agency Companies
Sell their products directly to the public, but the exclusive agent only represents one company and is NOT an employee of the company
Level 1 insurance
Brokers and agents must be supervised.
Level 2 Insurance
Authorized to sell all lines of insurance, personal and commercial without supervision.
Level 3 insurance
For a designated representative. The holder can own, manage, or supervise an insurance brokerage.
Principal
One who authorizes another to conduct some form of business on his or her behalf.
Independent Broker
May have contracts with many insurers
Brokers and Agents must take ____ hours annually of approved courses and seminars relating to their business
15
The insurers (principles) knowledge of a risk is the same as that of the intermediary (agent) What does this mean?
Information given to the agent by the client is deemed to be given to the insurer.
Binding Authority
Is the authority to bind an insurer to a contract without first submitting the application to an underwriter and to confirm such insurance coverage to an applicant.
Binder or cover note
A written confirmation that insurance coverage is in effect. Includes a summary of the coverages bound.
Fiduciary Duty
A duty to act in trust, and in the best interest of another, with respect to monetary matters.
Fiduciary
One who holds money or property in trust for another.
Net Premium
The amount of premium for a policy less the commission
Commission
The is the percentage or share of the premium earned by the agent or broker for producing the business.
Utmost Good Faith
A high standard of honesty
Material Fact
A fact that is continuing and substantial
Non - disclosure
A silence where there exists an obligation to speak.
Duty of disclosure
Is fundamental to the principle of utmost good faith that underlines all insurance transactions
Proof of Loss
A statutory declaration completed and signed by the insured for own damage claims
First step of claims process by the insured.
Forthwith give notice - a first notice of loss.
Conflict of Interest
A situation in which the concerns or aims of two different parties are incompatible.
Canadian Accredited Insurance (CAIB)
Student must complete 4 courses. 1. General Insurance 2, Commercial 3, Commercial and Liability 4, Management
Canadian Insurance Professional (CIP)
5 Mandatory, 3 applied, and 2 elective courses required.
Errors and Omissions requirements
A business that holds a certificate of authority, other than a restricted certificate, must have a coverage of at least 500 000 per claim with a maximum policy payout for all claims of 2 000 000 in a policy year.
E & O example
Your client thought they were insured, and they suffered a loss before you submitted their application to the insurer for binding confirmation.
Pure Risk
No possibility of gain, only loss
Risk Management
The minimization of the impact of accidental and business losses to an organization in a cost effective manner.
Speculative Risk
A possibility of loss or gain, ex. gambling or market risk
Loss Frequency
The probability or likelihood of an event occurring.
Loss Severity
Measures the seriousness of a loss.
Flow Chart
Maps out the sequence of business activities, an effective way of revealing bottlenecks in the event of equipment breakdown or damage in an area of the business.
Large Loss Principle
States that devastating exposures should be transferred to someone else.
Small Loss Principle
States that small losses should be retained as this is less expensive than buying insurance.
Elements of Loss Exposure
A. item subject to a loss
B. Potential cause of the loss
C. Financial consequences of the occurrence
Six Steps of Risk Management
- Identify exposures
- Evaluate risks
- Consider options
- Formulate plan
- Implement plan
- Monitor and modify plan
Tied Selling
An illegal practice whereby an agent agrees to sell a customer a good or service only if the customer agrees to buy some other good or service.
Certificate of Authority
An insurance license to operate as an insurance intermediary.
Purpose of Insurance Act
- To insure the financial health of insurers
- To insure insurance availability for consumers
- To ensure broker and agent Market place conduct
The Alberta Insurance Council exercises control over
Operations of insurance agents, brokers, and independent adjusters.
The Alberta Automobile Insurance Rate Board
Is responsible for the regulation of automobile insurance premiums for basic and additional coverages for private passenger vehicles
Five ethical practices required by an agent or broker
- Provide coverage best suited to the clients needs
- Resist being entices by remunerative gain
- Avoid taking advantage of a clients lack of knowledge or
- Hold information in strict confidence
- Be well educated and ensure the performance of duties is
completely handled.
PIPEDA
Personal Information Protection and Electronic Documents Act
Personal Information Protection and Electronic Documents Act
states that when private information is collected for a purpose, it can only be used for that purpose.
- Unless you obtain permission from your client to use it for
another purpose. - Unless required by a court of law to disclose the information
- With some exceptions
The Personal Information Protection Act (PIPA)
Applies to private commercial organizations within the province of Alberta
Tort
A civil wrong, a person who commits a tort (tortfeasor) will be held responsible and be required to compensate the injured party.
Unintentional Tort
Are careless acts that are not intended or deliberate, such as negligence.
Compensatory Damages
Awarded by a court to an injured party to compensate them for harm they have suffered, such as bodily injury and property damage.
Special Damages
Are quantifiable and are used to reimburse the injured party for expenses incurred because of injury or loss suffered. ex. Doctor bills., lost wages
General Damages
compensates for loss of companionship, pain or suffering
Void Policy
A policy that is treated as if it never existed.
